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Thursday, December 17, 2009

Interview with Darrell Cavens, Zulily

This morning, Seattle-based Zulily (www.zulily.com) announced it had received a Series A funding from Maveron, for a new startup focused on private-sales of products for kids, babies, and busy moms. The firm's co-founders--Darrell Cavens and Mark Vadon-- are both previously from Blue Nile. We spoke with Cavens, the firm's CEO, about the new company and its funding.

Thanks for the time. What is Zulily all about?

Darrell Cavens: We're really excited to be announcing our new site Zulily. It's a private sales site, focused on creating great access to products for kids, babies, and busy moms. We are looking at a set of products that are in the mid to upper range of their product categories, with a whole set of solutions, from gear, to apparel, furnishing, and toys. It's really across the whole kids category. We're focusing on the private sale space. With the private sale model, we have a new sale, typically every day, which lasts for around 72 hour, of a limited set of products, with great pricing. Consumers and members can sign up for our site, and each morning we send them an email detailing a new sale. There are limited quantities, and we may sell out. We're very excited about the model, and it's a very strong category. We've gone out and talked to busy moms out there, and they feel very excited that we can deliver this great solution to them.

It seems like there have been a number of private sale startups funded recently, why the interest in this area?

Darrell Cavens: As I look at retail ecommerce over the last ten years, this really feels like the first revolution in awhile we've seen. Consumers are really responding to this model of shopping. There's a set of reasons why. Great value is one of them, as is discovery of new products. In this model, consumers are able to learn about new products that they may not have known about, and they also get access to it at phenomenal pricing. At the same time, it's a very easy process for them. Each morning, they get an email--they don't have to go and hunt and search for products. Each morning, they are able to see and discover a new set of products, and from their viewpoint, it's an edited selection of quality products. Our specialization matters in these categories, where we can be an expert, and not have it be just an afterthought as part of another category--it's focused on just kids, babies, and busy moms.

It seems like it's a pretty tough year to be focusing on a consumer, e-commerce company--not to mention one focused on mid to upper end goods. Did that affect your plans at all?

Darrell Cavens: We've been very focused on the consumer proposition. Certainly, retail--in the traditional retail sense--has seen a few challenges. But, we're pretty excited about how consumers are continuing to adopt the online, private sale model. We feel like we've got a great idea for a business, and regardless of the timing, this will be something that consumers really respond to.

You mentioned a lot of this is actually driven by email?

Darrell Cavens: Correct. Typically, the way these private sale businesses work, is each morning consumers get an email outlining a product. We will have updates via Twitter, Facebook and other social networking models, but really--as we have talked to consumers--when they want a simple, easy method of accessing a product, it is through email. We will have sales available on the site, and through social networking, but email continues to be a great medium that consumers respond to very well.

Let's talk about this funding. It seems like a pretty big round for a Series A, what will that funding go towards?

Darrell Cavens: We're very excited to have partnered with Maveron, and it is a sizeable round, at $4.6M. It's primarily for general corporate purposes--to launch the site, hire a team, and really just launch the business. We have more than enough capital in this round to take us into the foreseeable future. We're using that funding to bring on some folks, and build out our technology platform and infrastructure, to launch the business.

Did the difficulty of raising capital factor into that round size?

Darrell Cavens: We got the amount we needed to grow and build a sustainable business. I don't think it was any larger or smaller than we wanted going into it--it gives us the right amount to build the business, and enough cushion that we are comfortable that we can build and get to scale on the money. I also believe that if you look at some of these businesses, they've done it with very little marketing, and I tend to believe you need to spend a little on marketing to drive consumer awareness.

Finally, why pick the area of kids, babies, and busy moms?

Darrell Cavens: We really liked the category. It's one we're very familiar with, as many of us are parents here. But, at the same time, if you look at the supply side, in this category there are thousands of small to mid-sized suppliers and manufacturers out there, who have a hard time getting distribution. There are lots of opportunities to provide distribution and marketing distribution to those brands, which they can't get through other retailers. We like the category, and looking at it from a retail standpoint, although at the lower end of the category you've got some large players like Babies R Us and Target, but in the mid market and upper market of the category, there are not that many large retailers. There's a great opportunity for us to build a strong retailer here.